Should i sell fannie mae stock
In the fall of , during the worst of the financial crisis, software architect Matt Hill began looking for stocks that were poised for a comeback. He settled on what seemed a sure bet: The companies had been put into conservatorship by the federal government at the height of the turmoil. But Hill figured he would share in the gains after they were nursed back to health, as promised at the time by then—Treasury Secretary Henry Paulson.
More than eight years later, Hill, now 46, is still waiting for his payday, as are thousands of others, including several influential hedge funds. Housing did come back, and so did profits for Fannie and Freddie.
But the government-sponsored entities GSEs remain under federal control, with their shares trading for the price of a drive-thru burrito. Like much of the economy, Fannie and Freddie were brought low by mortgage defaults during the Great Recession.
When the Treasury took over in , it maintained warrants on Few losses materialized, however, and by the giants were on the verge of turning profitable again.
Aggrieved investors went to court, arguing that the Treasury had taken their property. But so far litigation has not borne fruit: The target of the prayers is Mnuchin, who has signaled his sympathy for GSE shareholders.
Were the GSEs to go fully public, taxpayers would have a lot to gain.
Why Fannie Mae (FNMA) Stock & Freddie Mac (FMCC) Stock Are Worth Buying After 35% Collapse
Then again, tax reform might push Mnuchin to act sooner: A lower corporate rate could force the GSEs to write down their deferred tax assets, which could hurt their balance sheets and necessitate another bailout.
Mnuchin could also decide not to have any more profits sent to the Treasury, which would signal that the administration wants to let the GSEs build reserves so they can operate independently again. The next payment is due March AIG restructured its operations and paid back the Treasury, which sold off its shares in AIG is struggling today, but in the three years after the government divested, its stock more than doubled.
To assuage fears of future bailouts, some investors argue that GSEs should essentially become utilities—public companies that would be heavily regulated so they would avoid risky behaviors that tripped them up before. For now, tempted investors may be best off buying preferred shares. Owners of those shares have a stronger case in the ongoing court battles. Even if Fannie and Freddie are driven out of business, preferred shareholders would have priority over common-stock investors in recovering assets in liquidation or bankruptcy.
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A version of this article appears in the April 1, issue of Fortune with the headline "Hidden Treasures or Money Pits? Term Sheet Term Sheet — Wednesday, June Etsy Is Reorganizing Its Workforce, Which Includes More Layoffs. Fortune eBay Promises to Match Prices Against Amazon, Walmart, and More.
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